Delhi District Court
Bharat Foundry & Engg. Works & Ors vs Intec Capital Ltd on 18 August, 2020
IN THE COURT OF SH. NARESH KUMAR LAKA
ADDITIONAL DISTRICT JUDGE - 03, SOUTH EAST,
SAKET COURTS, NEW DELHI
ARBITRATION PETITION No.76/2018
ARBITRATION PETITION No.77/2018
ARBITRATION PETITION No.78/2018
ARBITRATION PETITION No.79/2018
IN THE MATTER OF :
BHARAT FOUNDRY & ENGG. WORKS & ORS.
............. PETITIONERS
VERSUS
INTEC CAPITAL LTD.
............... RESPONDENT
Date of Institution : 23.02.2018
Date of Final Arguments : 29.07.2020
Date of Judgment : 18.08.2020
JUDGMENT
Vide this common judgment, I shall decide four arbitration petitions bearing Nos.76/2018, 77/2018, 78/2018 and 79/2018 filed under Section 34 of the Arbitration & Conciliation Act, 1996 seeking setting aside of four arbitral Awards (as mentioned therein), along with accompanying applications filed under Section 5 of the Indian Limitation Act, 1963 seeking condonation of delay in filing the said four petitions under Section 34 of the Arbitration & Conciliation Act, 1996.
2. I have heard argument on the aforesaid petitions as well as Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 1 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd. applications from Ms. Akanksha Vyas, learned counsel for the petitioners and Sh. Sanjeev Pathak, learned counsel for the respondent at length through video conferencing.
3. The applications seeking condonation of delay find mentioned that the petitioner came to know about the passing of arbitration Award after receiving notice of execution proceeding and there is a delay of only 6 days from said date which had occasioned on account of oldness and illness of the petitioner No.2 and 3. The same is strongly opposed by the counsel for the respondent. As regards the counting of period of limitation, the date of delivery of final Award is to be reckoned but if the service of said Award is to be adjudicated upon, an inquiry would be required to be held by taking evidence of both the parties on account of disputed facts which will delay the disposal of the present petitions and will not be expedient. Moreover, it is a settled proposition of law that a liberal view is required to be taken on the applications seeking condonation of delay if the substantial rights of the parties are affected. The number of days of delay are also not significant. Therefore, all the four applications seeking condonation of delay are allowed with cost of Rs.2,000 each to be paid to the respondent by the petitioner within 30 days.
4. As far as the petitions under Section 34 of the Arbitration & Conciliation Act, 1996 are concerned, the petitioners claimed that they did not receive any notice of initiation of the arbitration proceedings, appointment of arbitrator or passing of Award and in fact the Awards in question were passed ex-parte, therefore, they all deserve to be set aside for not giving opportunity to the petitioner to present its case.
5. From the perusal of the proceedings of the learned Arbitrator, Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 2 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd. it is seen that notices of initiation of the arbitration proceedings were sent on 2-3 occasions to the petitioners through speed post and the delivery reports of the postal authorities have also been placed on record which showed "Item delivered". As per Section 3 of the Arbitration and Conciliation Act, 1996, service through speed post is treated as a deemed service unless contrary is proved. The petitioners did not dispute the postal address as mentioned on the Statement of Claims filed by the respondent. Thus there is a presumption of service as per Section 27 of the General Clauses Act also. As such, this Court holds that the petitioners were duly informed and served about the initiation of the arbitration proceedings but they did not deliberately or intentionally join it, and therefore, now they cannot be allowed to take benefit of their own wrong to seek setting aside of the entire arbitral proceedings by claiming it ex parte on account of alleged defects in service. Thus the said contention of the petitioner is rejected being meritless.
6. It is next argued by the learned counsel for the petitioner that the same Arbitrator was appointed in four cases which is contrary to the fundamental rules of independence and impartiality which have been incorporated in Section 12 of the Amended Arbitration & Conciliation Act. However, the learned counsel for the respondent argued that the said objection could have been taken by the petitioner before the Arbitrator only after receiving of notice of the arbitration proceedings and now such objection cannot be entertained in the present petition which has been filed under Section 34 of the Arbitration & Conciliation Act. He also raised an issue of limitation for availing such remedy.
7. On the other hand, the learned counsel for the petitioner relied on various cases and argued that the issue of impartiality and Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 3 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd. independence of the Arbitrator goes to the root of the matter and, therefore, the said objection can be taken even in the present petition under Section 34 of the Arbitration & Conciliation Act.
8. For a ready reference the appropriate observations of the cases as relied by the Ld. Counsel for the petitioner are extracted as under:
In Bharat Broadband Network Ltd. vs. United Telecoms Ltd., (2019) 5 SCC 755, Hon'ble Supreme Court of India observed as under:
"From a conspectus of the above decisions, it is clear that Section 12(1), as substituted by the Arbitration & Conciliation (Amendment) Act, 2015 ["Amendment Act, 2015"], makes it clear that when a person is approached in connection with his possible appointment as an arbitrator, it is his duty to disclose in writing any circumstances which are likely to give rise to justifiable doubts as to his independence or impartiality. The disclosure is to be made in the form specified in the Sixth Schedule, and the grounds stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Once this is done, the appointment of the arbitrator may be challenged on the ground that justifiable doubts have arisen under sub-section (3) of Section 12 subject to the caveat entered by sub- section (4) of Section
12. The challenge procedure is then set out in Section 13, together with the time limit laid down in Section 13(2). What is important to note is that the arbitral tribunal must first decide on the said challenge, and if it is not successful, the tribunal shall continue the proceedings and make an award. It is only post award that the party challenging the appointment of an arbitrator may make an application for setting aside such an award in accordance with Section 34 of the Act".
Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 4 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd.
In Alupro Building Systems Pvt. Ltd. vs. Ozone Overseas Pvt. Ltd. 2017, SCC Online DEL. 7228, Hon'ble Supreme Court of India observed as under:
"47. Turning to the case on hand, there is no denial that at the time he entered upon reference, the Arbitrator was adjudicating at least one of the claims of the Respondent in other arbitration proceedings. Admittedly, he did not disclose this fact at any time at the commencement of or during the arbitration proceedings. This fact was discovered later by the Petitioner. The averment on this aspect in the present petition has not been denied by the Respondent. In the circumstances, the Court is of the view that this is yet another ground on which the impugned Award is liable to be set aside as it is opposed to the fundamental policy of Indian law. It attracts the ground under Section 14 (1) read with Section 15 (1), viz. the Arbitrator being rendered de jure incapable of acting as such. It also attracts Section 34 (2) (b) (ii) of the Act".
9. From the daily order-sheets of the learned Arbitrator in the Petition No. 78/2018 (Arbitration No.146) and Petition No.79/2018 (Arbitration Petition No.147), it is seen that the disclosure statements were made on 25.03.2016 where the learned Arbitrator simply disclosed that the present cases involve a subject matter which needs to be dealt with by specialized body of the Arbitrators and, therefore, the disclosure was dispensed with in terms of Explanation 3 of 7th Schedule of the Arbitration & Conciliation Act.
10. In this context, the learned counsel for the petitioner specifically claimed that the transaction in question was financial assistance/loan and, therefore, it is not covered within the category of specialized matter as clarified in the Explanation 3 of the 7th Schedule. This Court finds substance in the said submissions in view of the language of the Explanation 3 which is reproduced as under:
Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 5 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd.
"Explanation 3: For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above."
11. Thus, this Court is of the considered opinion that when the Arbitrator was already appointed as an Arbitrator in two earlier matters i.e. No.146 and 147 between the same parties, the Arbitrator must have made a clear disclosure statement indicating the details of the previous two Arbitration matters and failure thereof amounts to be a violation of Entry No.22 of the 5th Schedule of the Act which reads as under:
"The Arbitrator has within the past 3 years been appointed as Arbitrator on two or more occasions by one of the parties or an affiliate of the party".
12. The argument of the Counsel for the respondent that the objection of applicability of Section 12 could have been taken during the course of arbitration proceedings only and not in the present petition under Section 34 of the Arbitration & Conciliation Act is not substantiated keeping in mind the fact that as per Section 12 of the said Act, the concerned Arbitrator was bound to make disclosure statement of the facts which give rise to justifiable doubts as to his independence or impartiality. Had the said fact been disclosed, they could have been challenged as per Section 13 of the said Act, but in the instant case, since the concerned arbitrator did not disclose said facts i.e. his appointment as Arbitrator in two previous cases, the petitioners did not have an opportunity to know about such important factum and in the absence thereof, the grounds of Section 13 and 14 of the said Act could not have been availed. The period of limitation as provided in Section 13 of the said Act also does not apply because it applies when Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 6 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd. such disclosure statement is made by the Arbitrator about his previous appointment and not when it is silent or dispensed with. The judgments relied by the counsel for the respondents are not applicable on the factual aspects of the cases.
13. Consequently, it is held that the non-disclosure of the vital information or dispensing it off by the Arbitrator becomes a challengeable ground under the present petition under Section 34 of the Arbitration & Conciliation Act. Reliance can be placed in this regard on the above-cited second case, as relied by the Ld. Counsel for the petitioner. The said non- disclosure goes to the root of the matter and affected the impartiality and de jure competence of the arbitrator to entertain cases as an Arbitrator for more than two occasions within the period of 3 years. Thus, the said argument of the learned counsel for the respondent is rejected.
14. In the light of the aforesaid discussion, the two Awards in question which are challenged in the Petition No.78/2018 and 79/2018 are upheld whereas the Awards which are impugned in the Petition No.76/2018 and 77/2018 are set aside. In result, the Petition bearing No.78/2018 and 79/2018 are dismissed while the Petition bearing No.76/2018 and 77/2018 are allowed. The record of the Arbitrator be sent back to the concerned Arbitrator through process agency on filing of PF or it can be given dasti to the respondent/AR who will deliver it to the concerned Arbitrator along with copy of this judgment.
15. The FDRs (Term Deposit Receipts) placed on record on behalf of the petitioners for grant of stay, be released to the respondent where awards in question have been upheld, for adjustment in the due amount Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 7 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd. towards such awards and the FDRs of the petitioners, where awards have been set-aside, be released back to the petitioners. The said FDRs is coupled with up-to-date interest and the concerned Branch Manager will transfer it as directed above. The Ahlmad shall do the needful for making necessary endorsement of the said FDRs, retaining attested copy thereof, taking copy of ID proofs and acknowledgement. The PDF file of Judgment be sent to the Computer Branch for uploading it on the official website. Files be consigned to the record room after due compliance.
Announced in the open court through video conferencing on 18.08.2020 (Naresh Kumar Laka) Additional District Judge-03 South-East District, Saket Court, New Delhi.
Arbt. Petition Nos. 76/18, 77/18, 78/18 & 79/18 Page No. 8 of 8 Bharat Foundry & Engg. Works & Ors. Vs. Intec Capital Ltd.